New Pain no gain
Sanctions are reportedly hurting Russia's economy and Ukraine war aims, and new oil caps could hit harder
Russian President Vladimir Putin claimed for months that Western-led sanctions imposed over his invasion of Ukraine had failed, but even he now seems to recognize the economic fallout on Russia's economy and war effort. "Recent figures show the situation has worsened considerably since the summer when, buoyed by a steady stream of oil and gas revenue, the Russian economy seemed to stabilize," The Washington Post reports, citing economists, Russian business executives, and official Russian statistics showing steep drops in non-oil tax revenue and retail sales.
"All objective indicators show there is a very strong drop in economic activity," Vladimir Milov, an dissident former Russian deputy energy minister, tells the Post. "The spiral is escalating, and there is no way out of this now."
"The Western ban on technology imports is affecting most sectors of the economy, while the Kremlin's forced mobilization of more than 300,000 Russian conscripts to serve in Ukraine, combined with the departure of at least as many abroad fleeing the draft, has dealt a further blow," the Post reports. Putin has also effectively cut natural gas production by limiting exports to Europe.
Moscow's oil revenue could take a further hit when the European Union bans most Russian crude imports and, with the U.S. and other allies, impose price controls on most Russia oil exports by limiting shipping, trading, insuring, and financing Russian oil shipments anywhere that agrees to pay more than a set price. Those combined measures, set to take effect Dec. 5, could deprive Russia of at least $120 million per day in lost revenue, Milov told the Post.
But the damage to Russia will be determined by how low the EU and U.S. set the price cap, how Russia responds, whether OPEC+ cuts crude production, and how soon China's depressed demand for oil recovers after COVID-19 lockdowns, The Wall Street Journal reports. Russia has already cut its oil prices to entice wary buyers.
And U.S. sanctions, combined with Ukraine's "courage and ingenuity," have already made a "real difference" on Russia's ability to conduct its war in Ukraine "in any modern terms," U.S. Ambassador Jim O'Brien, head of the State Department's Office of Sanctions Coordination, told CNN on Sunday. "You see the communications are lacking. Precision weapons. Rapid movement of troops. So it's fighting a different kind of war," with vastly scaled-back ambitions.